THE MEDIA BUSINESS: Advertising; The direct marketing industry takes a look at the perils of interactive technology.

By Stuart Elliott

Published: May 22, 1995

AS interactive marketing becomes more prevalent, it seems to make sense that the direct marketing industry would benefit. After all, isn't interactive marketing just a high-tech way to provide product information or make a sale? How much difference can there be between using an on-line computer service or a CD-ROM and using a telephone or a letter proclaiming "You may already be a winner!"?

Yet as direct marketers gather for a big annual conference, answering those questions is not as simple as it appears.

"There really are enormous changes taking place in the fundamental relationships between buyer and seller that are technology driven," said Martin Nisenholtz, who last year became director for content strategy at the Ameritech Corporation in Chicago after serving as senior vice president and electronic marketing director at the Ogilvy & Mather Direct Worldwide unit of the WPP Group in New York.

"But a backlash against the 'information superhighway' is becoming part of the environment," added Mr. Nisenholtz, who will deliver a keynote address tomorrow morning at the 30th annual Marketing Conference and Exposition at the New York Hilton in midtown Manhattan. The conference, sponsored by DMDNY, was known as Direct Marketing Day in New York until the program expanded beyond one day; it begins with workshops today and continues through Wednesday.

Another keynote speaker, scheduled to address the conference on Wednesday morning, is James R. Rosenfield, chairman and chief executive of Rosenfield & Associates in San Diego, a marketing consulting company specializing in customer communications.

"There's no doubt direct marketers are best positioned for interactive marketing from a cultural and experiential standpoint," he said. "The problem is, in order to take advantage of this intelligently, we have to be very careful about believing our own hype.

"The predictions being made about the information superhighway very closely parallel the predictions in the 1950's about atomic energy. One reason is that we're still dealing with an 'early adopter' marketplace, that is, with enthusiasts who are really into all this."

Mr. Rosenfield, whose clients include marketers like the AT& T Corporation, the General Motors Corporation and Mastercard International, predicted that "interactivity will not be important in marketing" until it advances beyond a novelty phase and gains acceptance by proving its practicality as other technological advances did.

"The automobile went from 'Let's drive the motor car' to 'Let's go to the store,' " he said. "And phoning went from 'Let's use the telephone' to 'Let's call so-and-so.' "

But two large barriers loom, according to Mr. Rosenfield. One is the gap between technological promise and performance.

"Technology is entropic," he declared. "It always degrades. The biggest problem is what I call 'mid-tech' -- the trappings of high tech, but delivering a low-tech experience."

"When you check into a hotel and have to wait in line for 45 minutes because the computer is down, that's mid-tech," he added. "When you call an '800' number and it just rings 20 times, that's mid-tech. It drives customers away, and since you make money from retaining customers, it's killing your profits."

To prevent mid-tech, Mr. Rosenfield recommends that "the people who run companies audit their own technologies."

"Call your own '800' number and see what happens," he said.

The second barrier to the acceptance of interactive marketing, Mr. Rosenfield said, is concern among consumers about privacy and security.

"The fact about information is that it leaks," he asserted. "Companies are working on technologies they say can maintain the privacy of your credit card number, but my fear would be that any 16-year-old hacker could break down a particular encryption technique in about a second and immediately distribute my Mastercard number to 50 million sites in the world. That's pretty scary."

"Computers and interactivity," he added, "exacerbate the possibility of some real privacy apocalypse, someone making so big a mistake with customer information it could precipitate some kind of privacy legislation on a national basis.'

And that could mean it would take much longer for interactive marketing to become a force, he said.

Mr. Nisenholtz is more sanguine on this issue.

"Are privacy and security issues legitimate?" he asked. "Absolutely. There's an ongoing need for vigilance, but the only way to address this is from a rational perspective, not a hysterical one."

"At the end of the day, consumers drive all this," Mr. Nisenholtz said. "So if they're upset, they need to be mollified. But companies are addressing these concerns, so once consumers understand that systems are secure I think they'll be willing to do what they do for the most part now on the telephone."